q4 2006 presentation
DESCRIPTION
Financial results presentation from the international entertainment broadcasting group Modern Times Group MTG AB.TRANSCRIPT
1
Maximising the Power of Entertainment
Modern Times Group MTG AB
Fourth Quarter and Full Year Financial Results2006
London, 16 February 2007
2
Results HighlightsRecord Sales & Profits
Full YearFourth quarter
Group net sales up 18% to SEK 2,918 million
Group operating income of SEK 435 million, including SEK 79 million non-cash write down of intangible assets
Viasat Broadcasting net sales up 14% to SEK 2,310 million and operating profit up 16% to SEK 501 million
Net income of SEK 316 million
Net intake of 41,000 premium subscribers in Nordic region
Cash from ops doubled to SEK 673 million
Basic earnings per share of SEK 4.60 (4.29)
Group net sales up 27% to SEK 10,136 million
Group net sales up 17% excluding new businesses
Group operating income up 47% to SEK 1,777 million, despite SEK 79 million non-cash write down
Viasat Broadcasting net sales up 29% to SEK 8,291 million and operating incomeup 43% to SEK 1,880 million
Net income of SEK 1,499 million, including SEK 241 million non-cash financial gain from CTC Media IPO
Basic earnings per share of SEK 21.57 (17.78)
Board to propose dividend of SEK 7.50 per share & buy-back of up to 10% of share capital
3
-
2,000
4,000
6,000
8,000
10,000
12,000
2002 2003 2004 2005 20060
5
10
15
20
25
30
Net Sales Operating income Operating Margin (%)
5 Years of Growth
(SEK million) (%)
4
Double Viasat Broadcasting revenues in 5 years
MTG to become #1 commercial free-to-air operator in Sweden and TV3 to become #2 commercial free-to-air channel in Norway within 5 years
Export integrated model into new high growth territories - C & E European businesses to generate same level of broadcasting revenues & profits as Scandinavian operations within 5 years
>15% operating margins in 3 core businesses - Free-to-air TVScandinavia; Pay-TV Nordic; C&E Europe
Strategic ObjectivesSet in June 2004
Objective On Track
Viasat Broadcasting sales up 78% from 2003
Continuation of shut-down of Swedish analogue terrestrial network increases penetration in Sweden; TV3 Norway is second largest commercial channel in comparable universe in each month
Operating income incl. CTC Media amounted to SEK 736 million for full year, compared to SEK 1,159 million from the Nordic operations
Full year operating margins of 18% for Free-to-air TV Scandinavia; 19% for Pay-TV Nordic; & 17% for C&E Europe (excl. CTC Media)
5
Viasat BroadcastingOperating Results
1,880
-14
432
304
17%
597
19%
562
18%
8,291
229
1,841
3,183
3,038
FY 2006
1,316
54
187
76
9%
507
19%
492
17%
6,437
80
813
2,633
2,912
FY 2005
76
20%
111
20%
Central & Eastern Europe
Operating margin
370553Central & Eastern Europe
188
22%
174
20%
Free-to-air TV Scandinavia
Operating margin
875852Free-to-air TV Scandinavia
2339Associated Companies85Other & Eliminations
431501Total EBIT
136
19%
173
20%
Pay-TV Nordic
Operating margin
Operating income (EBIT)
2,0232,310Total net sales
5256Other & eliminations
726849Pay-TV Nordic
Net Sales
Q4 2005Q4 2006(SEK million)
6
0
500
1,000
1,500
2,000
Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006
Free-to-air Scandinavia Pay-TV Nordic Central & Eastern Europe CTC Media
0
2,000
4,000
6,000
8,000
10,000
Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006
Free-to-air Scandinavia Pay-TV Nordic Central & Eastern Europe
Viasat Broadcasting12 Months Rolling
Sales (SEK million)
EBIT (SEK million)
7
Viasat BroadcastingGeographical Segmentation
Sales
EBIT (Including CTC Media)
13%
41%
46%
21%
39%
40%
FTA Swe/No/Dk
Pay-TV Nordic
CEE
FTA Swe/No/Dk
Pay-TV Nordic
CEE
200523%
38%
39%
39%
30%
31%
2006
20062005
8
Sweden
Norway
Denmark
Free-to-air TV ScandinaviaLower than anticipated costs offset lower sales
Net sales up 4% to SEK 3,038 million in 2006
TV3/TV6 Sweden penetration up to 78% and 75%
CSOV (15-49) ratings flat in Sweden
Rating decreases in Norway
Denmark ratings down year on year in Q4 but up from Q3
Operating costs down 1% in Q4 and up 2% for FY, due to lower than anticipated programming cost increases and release of provisions
Operating margin of 20% in Q4 and 18% for full year
TV6 successfully launched in Sweden with CSOV up 67% vs ZTV
9
10
15
20
25
30
35
2003 2004 2005 2006
TV3 & TV6 Sweden TV3 & 3+ Denmark TV3 & ZTV Norway
Free-to-air-TV Scandinavia Commercial Share of Viewing (15-49)
(%)
10
Free-to-air TV SwedenActions
Integrated Media house approach – TV3, TV6, TV8, ZTV bundling
Increase investments in Sports and Acquired programming with total programming costs expected to be up by approximately 10 %
More scientific approach
Regular brand tracking
Re-engineered own-production process
Earlier targeted use of focus groups
Refocused scheduling
Increase pressure on local production companies
Middle management changes
11
Free-to-air TV ScandinaviaSales and Operating Profit - 12 Months Rolling
Pay-TV Nordic subscriber base & quarterly annualized ARPU development
2400
2500
2600
2700
2800
2900
3000
3100
Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006100
200
300
400
500
600
700
800Sales EBIT
(SEK million) (SEK million)
12
Pay-TV NordicContinued Healthy Subscriber Intake & Margins
Net intake of 41,000 premium subscribers in Q4 – 123,000 subs addedin last 12 months = 20% growth in premium subcriber baseNet sales up 17% to SEK 849 million in Q4 and 21% to SEK 3,183 million for full year12 third party channels added since beginning of 2006. Added TV2 News in Denmark from December 06Launch of dedicated Viasat Golf channelAnnounced launch of two new sports channels in Denmark with TV2Investments in content + investments in technology of approximately SEK 160 million during 2007
Movies Sports Children
Entertainment Documentaries Music
13
Pay-TV NordicPremium Subscriber & ARPU Growth
300350400450500550600650700750800
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2004 2005 2006
30003100320033003400350036003700380039004000
Premium Subscribers Annualized ARPU
126,000 Viasat+ and Multiroom subscriptions represent 18% of premium DTH subscriber base
ARPU up 6% year on year to SEK 3,470
(’000 subscribers) (SEK)
14
200
300
400
500
600
700
800
900
Q12004
Q22004
Q32004
Q42004
Q12005
Q22005
Q32005
Q42005
Q12006
Q22006
Q32006
Q42006
30
80
130
180
230
280Sales EBIT
Pay-TV NordicIncreasing Margins
Healthy sales growth of 17% in Q4 and 21% for the full year in highly competitive market
Operating margin of 20% in Q4 and 19% for full year
Leading premium offering with continued focus on premium subscribers
Approx SEK 160 million anticipated investments in 2007 to further enhance offering
(SEK million) (SEK million)
15
The Baltics
Czech Republic
Russia
Hungary
Slovenia
Pay-TV
Net sales up by 49% to SEK 553 million in Q4 and more than doubled to SEK 1,841 million for full year, including consolidation of TV Prima and TV3 Slovenia
Operating margin, excluding associated company income (CTC), of 20% (20%)and 17% (9%) for the two periods
Addition of new Viasat Sport channel together with NASN from November 2006
DTV net sales up 38% to SEK 51 million in Q4 and near doubled to SEK 181 million for full year.
Baltics net sales up 21% to SEK 471 million with pan-Baltic CSOV (15-49) of 36.9% for the full year
First time ever annual profit for DTV Russiaand Viasat3 Hungary
Central & Eastern EuropeHigh Growth & Increasing Profitability
16
Central & Eastern Europe12 Months Rolling (Excl. CTC media)
Strong exposure to fast growing Eastern European markets
Proven strategy for acquisition and management of Eastern European assets
Strong integrated model and know-how benefits future expansion
0
200
400
600
8001000
1200
1400
1600
1800
2000
Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006-100
0
100
200
300
400
500Sales EBIT
(SEK million) (SEK million)
17
15
20
25
30
35
40
45
50
55
2003Q1
2003Q2
2003Q3
2003Q4
2004Q1
2004Q2
2004Q3
2004Q4
2005Q1
2005Q2
2005Q3
2005Q4
2006Q1
2006Q2
2006Q3
2006Q4
TV Prima Czech Republic TV3 & 3+ EstoniaTV3 & 3+ Latvia TV3 & Tango TV Lithuania
Free-to-air TV Eastern Europe Commercial Share of Viewing
(%)
18
0123456789
10
2003Q1
2003Q2
2003Q3
2003Q4
2004Q1
2004Q2
2004Q3
2004Q4
2005Q1
2005Q2
2005Q3
2005Q4
2006Q1
2006Q2
2006Q3
2006Q4
Viasat 3 Hungary (18-49) TV 3 Slovenia (15-49) DTV Russia (6-54)
Free-to-air TV Eastern Europe Commercial Share of Viewing contd.
(%)
19
Underlying net sales growth of 32% in Q4 and of 56% for FY
Operating profits of SEK 52 million in Q4 and SEK 171 millions for full year = operating margins of 22% and 20%
Management continues to implement changes to improve operating efficiency
Focus on delivery of prime time own productions to boost overall ratings
Agreements with Warner, Universal, Fox and Disney signed during 2006
TV PrimaCzech Republic
20
DTV Russia12 Months Rolling
Distribution increase through MosTelecom deal now expected to add 1.5 million households in Moscow
2005 sales agreement with Video International drives sales growth
First ever annual profit despite continued programming investments
-50
0
50
100
150
200
Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006
Sales EBIT(SEK million)
21
Free-to-air TV Baltics12 Months Rolling
Recognized brands with leading market positions
Recent ratings softness in Estonia being addressed through local productions of hit international formats
Continued net sales and profits growth, and margin improvement
200
250
300
350
400
450
500
Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 200605101520253035404550
Sales EBIT Margin(SEK million) (%)
22
Viasat3 Hungary12 Months Rolling
Net sales up 16% to SEK 38 million in Q4 and 30% to SEK 117 million for FY
First ever annual profit + 13% margin in Q4
Continued ratings and market share improvements
-60
-40
-20
0
20
40
60
80
100
120
140
Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006
Sales EBIT(SEK million)
23
Acquired 100% of issued share capital of Prva TV d.o.o. in August 2006
Total cash consideration of EUR 8.1 million
Rebranding of TV3 Slovenia within 1 month of control
Ongoing investments in programming and branding
More than doubling in CSOV to 7.3% by year end
Operating loss of SEK 12 million for Q4 and SEK 15 million sinceacquisition
TV3Slovenia
24
Baltic DTH Pay-TV Platform
Doubling of premium subscriber base to 80,000 by year end
Viasat established as largest digital TV operator in the Baltics
Addition of ten Baltic public service channels to platform in summer 2006
0
10
20
30
40
50
60
70
80
90
Q12004
Q22004
Q32004
Q42004
Q12005
Q22005
Q32005
Q42005
Q12006
Q22006
Q32006
Q42006
Premium DTH Subscribers(thousands)
25
-2,000,0004,000,0006,000,0008,000,000
10,000,00012,000,00014,000,00016,000,00018,000,00020,000,000
Q42003
Q12004
Q22004
Q32004
Q42004
Q12005
Q22005
Q32005
Q42005
Q2006
Q22006
Q32006
Q42006
Wholesale Pay-TV Eastern Europe
Addition of 7.1 million subscribers in 2006 = 61% growth
Increased average revenue per sold subscription by 25% following price rises
Launch of premium Russian channel Viasat Sport East and TV1000 Balkan + expansion into Croatia
Subscriptions
26
0
50
100
150
200
250
Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006-30.0-25.0-20.0-15.0-10.0-5.00.05.010.015.0
Sales EBIT
Pay-TV East12 Months Rolling
Doubling of sales to SEK 70 million in Q4 and SEK 220 million for FY
First annual profit + 10% margin in Q4
DTH platform still in investment phase
(SEK million)
27
Radio12 Months Rolling
Net sales more than doubled to SEK 169 million in Q4 and up 49% to SEK 433 million in 2006
EBIT more than tripled to SEK 33 million in Q4 and more than doubled to SEK 78 million for FY = operating margins of 21% and 14% (excluding associates)
Consolidation of P4 Radio from 1 October 2006
-500
50100150200250300350400450500
Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006
Sales EBIT(SEK million) (excl. associated companies)
28
Other BusinessesHighlights
Home Shopping Modern Studios
Net sales for Modern Studios of SEK 172 (160) million in Q4 and SEK 619 (638) million for FY
‘Farväl Falkenberg’ nominated for Oscars and ‘Förortsungar’ awarded 5 Guldbaggen awards
SEK 79 million of non-cash intangible asset write downs
Strix opened office in Czech Republic following TV Prima acquisition
SEK -84 (10) million operating loss in Q4 and SEK -80 (-26) million for FY
Combined 12% sales growth for CDON and TV Shop to SEK 334 million in Q4 & 10% to SEK 1,087 million for FY
CDON.com - DVD sales increased > 50% in Q4 and pay per view ‘on demand’ streaming launched in Q3
CDON.com accounted for 76% of business area sales in Q4 and 68% for FY
Internet sales accounted for approximately 41% of TV Shop’s sales in Q4 and 35% in 2006
Total operating profit of SEK 21 (21) million in Q4 and SEK 54 (63) million for FY
29
All Business AreasOperating Results
1,213
1,316
23
37
-163
8,012
-473
290
1,629
128
6,437
FY 2005
1,777
1,880
78
-26
-155
10,136
-406
433
1,706
111
8,291
FY 2006
427435Total EBIT
431
10
30
-43
501
33
-63
-36
Viasat Broadcasting
Radio
Other business areas
Parent company & other companies
Operating income (EBIT)
2,4632,918Total net sales
-126-92Eliminations
2,0232,310Viasat Broadcasting
77
459
30
169
506
25
Radio
Other business areas
Parent company & other companies
Net Sales
Q4 2005Q4 2006(SEK million)
30
Summary Income Statement
21.57
67,042,524
1,499
-517
2,016
241
-5
3
1,777
10,136
FY 2006
384-51Gain/loss from financial assets
17.78
66,375,156
1,185
-310
1,495
-
-102
1,213
8,012
FY 2005
-114-114Tax
288316Net Income for the period
66,375,15667,042,524Basic number of shares outstanding
4.294.60Basic earnings per share (SEK)
401431Income before tax
-
-21
-
-5
Non-cash gain from CTC Media IPO new share issue
Net interest and other financial items
427435Operating income (EBIT)
2,4632,918Net Sales
Q4 2005Q4 2006(SEK million)
31
Cash Flow
559
55
-477
22
-80
-932
513
981
16
966
FY 2005
-645-900-40Investments in shares in subsidiaries & associates
-78-38141Changes in working capital
1,294331673Net cash flow from operations
21--Proceeds from sales of shares
-533
-877
-950
2
-329
1,372
FY 2006
-17-72Investments in other non-current assets
-929-110Cash flow from/to investing activities
66-593Cash flow from/to financing activities
-532-30Net change in cash and cash equivalents for the period
-122Other cash flow from investing activities
370533Cash flow from operations
Q4 2005
Q4 2006
(SEK million)
SEK 658 million net invested in the acquisition of P4 Radio sharesSEK 73 million net invested in PRVAInvestments in distribution in DTV RussiaRepayment of EUR 120 million convertible loan in June 2006
32
0%
5%
10%
15%
20%
25%
30%
35%
2002 2003 2004 2005 2006
Key metrics improvement
Cash flow per basic share (SEK)
Rolling 12 Months
0
5
10
15
20
25
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2003 2004 2005 2006
(%)
Return on Capital Employed
33
Balance Sheet
9,795
4,240
249
5,306
9,795
4,314
5,481
9,205
3,796
305
5,105
9,205
4,314
4,891
Long-term liabilities
Total equity & liabilities
Current liabilities
Shareholders’ equity
Total assets
Current assets
Non-current assets
31 Dec 200531 Dec 2006(SEK million)
SEK 250 million utilised of SEK 3.5 billion credit facility by year endNet cash position of SEK 430 (15) million (SEK -28 million Q3 2006)Equity to assets ratio of 56% (55%)Equity reduced by SEK 1.5 billion due to distribution of Metro International sharesSEK 8.5 billion surplus to book value for CTC Media 39.6% shareholding
34
Net cash position of SEK 430 million at year end
Increased cash flow from operations of SEK 1.3 billion for full year
Available liquid funds of SEK 4 billion as at 31 December 2006
Return on capital employed of 29% for full year
Proposed dividend of SEK 7.50 per share of totalling maximum distribution of SEK 503 million
Proposal to seek authorisation for buy back of up to 10% of outstanding shares – accretive for shareholders and effective means of increasing shareholder value
Round trading lot reduced from 50 to 25 shares to further stimulate liquidity
Balancing appropriate financial flexibility with shareholder returns
Capital StructureSupporting aggressive growth
35